On the third day of Minnesota's largest state employee strike, many of the workers walking the picket lines say their main reason for striking is the health insurance package offered by the state. State officials say years of double-digit health insurance increases leave the state with no choice but to pass some of those costs onto employees, just as the private sector has done. The unions say they're willing to absorb some of the costs, but say the increase in out-of-pocket expenses will dwarf any pay raise for many employees.

"It's the health insurance;- they just took us apart," says Lu Frits, a striking worker. "It's been bad enough with the raises that we've been getting just on our co-pays for family coverage, but now it's really bad for people that are sick, and that are chronically ill.

Contract talks between the state and its two largest unions - AFSCME and MAPE - broke down over both wages and health insurance, but for many employees, benefits are the bigger concern.

"It's the health insurance;- they just took us apart," says Lu Frits, a striking worker. "It's been bad enough with the raises that we've been getting just on our co-pays for family coverage, but now it's really bad for people that are sick, and that are chronically ill.

Frits and her co-workers at Intertech, a department that handles the state's phone systems, data and video networks, say they've been told that someone who needs chemotherapy, for example, would have to pay $4,000 out-of-pocket. The actual number isn't quite that high; under the state's latest offer, the most a family would pay is $3,200 in the first year of the contract and $3,800 in the second year.

State officials say they're forced to pass some costs onto employees. They say the state's health insurance costs have gone up 20 percent in each of the last two years. But they argue the state is still offering an attractive benefits package.

Dave Haugen, assistant commissioner in the Department of Employee Relations, says under the latest offer, single employees pay no premium, and families pay a premium of about $50 a month. "We have three different cost-sharing options. In our low-cost sharing option, we have only a $5 office visit co-pay, a $100 one-time annual deductible for singles, $200 for families," he says.

Compared to the private sector, that's extremely generous, according to Caroline Jones, director of health care policy for the Minnesota Chamber of Commerce. Jones says only about half of Minnesota businesses provide health insurance for their workers. Of the employers who do, Jones says 93 percent offer workers only one health plan option, and it usually includes higher premiums and co-pays than the state plan.

"Employers pay about 80 percent for individual coverage and about 70 percent for family coverage, in terms of the overall premiums, and then most have some type of a co-pay or deductible included in that, generally in the $10 per office visit range," according to Jones.

Union leaders acknowledge that the state's health insurance is more generous than most employers. But assistant AFSCME director Pat Urquhart says they have to weigh that against salaries that are generally lower than the private sector. "If our salary were commensurate with the private sector, we probably would be able to do a little more in the insurance area, but on the average, our starting wage for our employees is significantly less than the private sector," Urquhart says.

Urquhart says the unions realize that they have to absorb some of the state's health insurance costs, but say if they accept the state's offer, medical costs could swallow up the proposed pay raise for many members. "It's the time that you have that catastrophic illness, or lingering illness, that will break you," Urquhart says.

State officials say they're willing to consider the unions' suggestions, but say the changes the unions are seeking would cost the state millions of dollars in additional health care costs. No new talks are scheduled, and both sides say resolving the health insurance part of the contract will be extremely difficult.